Kodak Sells Gallery Service To Shutterfly

said Thursday it will further divest of its consumer photography businesses by
selling its online Kodak Gallery photo services business to Shutterfly for
$23.8 million.

The former photography giant, which is struggling under federal
bankruptcy protection, said last month that is was shuttering its photographic
hardware business, and it will be looking a generate $1 billion to $2 billion
by selling a portfolio of 1,100 digital patents this year.

Kodak said the deal with Shutterfly followed a "stalking horse"
bid. Shutterfly plans to transfer Kodak Gallery customer accounts and images in
the United States and Canada to Shutterfly, and will allow customers to opt out
of the transition if they want to.

Kodak Gallery provides online sales of user generated images on custom
printed photobooks, cards and albums. The service has more than 75 million
registered users.

Kodak said that going forward it will be concentrating its remaining
consumer business on retail and destination photo solutions as well as home
printing products.

Shutterfly, which has offered a competitive service to Kodak
Gallery, bought privately held card design company Tiny Prints last year for $333
million in cash and stock, and continues to compete with Hewlett-Packard and
American Greetings in online custom photo products.